Texas Judge Blocks Overtime Rule

November 22, 2016 - Breaking news out of the State of Texas, the U.S. District Court of Texas has granted a preliminary injunction against the Fair Labor Standards Act (FLSA) overtime rule (click here to view the injunction). The presiding Judge the Honorable Amos Mazzant found in his opinion that the lawsuit filed by 21 states and a variety of employer groups, were able to effectively show “irreparable harm” if the rule were to go into effect. The rule has been halted for the time being and will not go into effect on December 1, 2016, giving employers a reprieve. The Department of Labor is likely to appeal the decision.

On September 20, 2016, 21 states filed a lawsuit in federal court to halt the implementation of a new Obama Administration rule on overtime pay. Also on September 20, 2016, the U.S. Chamber of Commerce led a group of 50 business associations in East Texas to file a similar suit in the same court. The Court quickly consolidated the cases, and a single hearing was held on November 16, 2016, to determine if the Court will intervene in the implementation of the overtime rule.

Background

On May 18, 2016, the Obama Administration announced the details of its final rule on federal standards for exempting workers from overtime pay. The new rule would have increased the salary level under which workers are eligible for overtime pay, from $455 per week ($23,660 per year) to $913 per week ($47,476 per year), and allow for this threshold to be automatically adjusted every three years. Additionally, the higher salary threshold for exempting “highly compensated employees” from overtime pay would have been raised from $100,000 per year to $134,004 per year, and employers may include bonus compensation as up to 10 percent of an employee’s salary for purposes of calculating non-“highly compensated employee” pay (previously this pay was excluded from calculation).

The updated overtime rule would have gone into effect on December 1, 2016, for all employers. The Administration’s changes to the rule came after an initial proposal in 2015 which would have increased the lower salary threshold to $50,440 for a worker to be eligible for overtime.

Business organizations such as TIA, the U.S. Chamber of Commerce, the National Retail Federation, and others have opposed the increase on the grounds that these salary thresholds will harm private-sector employment and make workplaces less flexible for employees. This dramatic increase would have also significantly impacted non-profit organizations, as well as colleges and universities, which will struggle to find the funding to provide additional pay to dedicated employees. Further, this rulemaking would have a disproportionate impact on employers in rural areas or parts of the country where costs of living are lower and where few salaries reach the exemption level. Employees in those areas would have been forced to work on an hourly basis as a result of this rulemaking.

Federal Hearing on Rolling Back Overtime Rule

November 16, 2016 - U.S. District Judge Amos L. Mazzant, III of the U.S. District Court for the Eastern District of Texas will conduct a hearing today on the new federal rule that increases the number of individuals who are eligible for overtime pay. The rule, which is scheduled to take effect on December 1, 2016, would dramatically increase the salary threshold that an employee must be paid before they can be exempted from federally-mandated overtime compensation. The previous level, which was set in 2004, allowed employers to meet the salary level test for exemption by compensating employees at $23,660 annually. The new rule would increase that amount to $47,476 annually (an increase of over 100%), and would set an automatic increase for that salary level every three years. The rule will make approximately 4.2 million American workers eligible for additional pay. Unless Judge Mazzant issues an injunction prior to the implementation date, all employers must be prepared to comply with the new rule.

The hearing will deal with a case that includes two major plaintiff groups: a group of 21 state Attorneys General, and a group of employers from East Texas. Both groups allege that the Department of Labor exceeded its authority under the Fair Labor Standards Act, and exceeded the intent of Congress, in mandating such a large increase in the salary threshold. Additionally, the groups challenge that the Department of Labor lacks the statutory authority to implement an automatic increase for the salary level threshold, as was included in the final rule.

TIA has been working hard to ensure that TIA members have the most up-to-date information on this important regulatory issue. TIA members have access to two webinars with legal and employment experts, which are available in the Members Only section of the TIA website. Additionally, TIA has an updated Labor Law Compliance Framework, which is also available to members through the Members Only section of the website. For more information on this issue, or to get involved with TIA’s Operations and Labor Committees, please contact Will Sehestedt at sehestedt@tianet.org or 703-299-5700.

21 States File Lawsuit Against New Federal Overtime Rule

September 21, 2016 - Twenty-one states filed a lawsuit in federal court to halt the implementation of a new Administration rule on overtime pay on September 20, 2016. The rule, which was finalized in May 2016 and which will take full effect on December 1, 2016, will dramatically increase the number of workers who are eligible for overtime pay.

The lawsuit, which is led by Texas and Nevada, was filed in the United States District Court for the Eastern District of Texas, in the court of Judge Amos L. Mazzant III. The lawsuit alleges that the new overtime exemption rules will force many businesses and local governments to increase their employment costs to meet the new overtime salary threshold of $47,476 per year. Employees not only in the private sector, but also public employees of state and local government, and public colleges and universities, will have to make at least that amount per year in order to be exempted by their employer from overtime pay under the “white collar” salary-basis exemption.

The plaintiffs in the lawsuit are Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah, and Wisconsin. The states argue that the financial impacts of the new rule are unduly burdensome financially on the local and state governments. For example, in Iowa, the new rule will add approximately $19.1 million in additional costs to state government and public universities in the first year alone. The impact in other states is similarly burdensome.

The plaintiffs request that the new overtime rule be judged unlawful for those states, and that implementation be halted by the court. It is unclear whether the court will hold a hearing and issue any decision before the December 1, 2016 implementation deadline in the final federal rule. However, there is at least the possibility of relief for employers as a result of this lawsuit.

The federal rulemaking was undertaken to revise the standards in the Fair Labor Standards Act (FLSA). The FLSA took effect in 1938, guaranteeing workers would receive no less than a minimum wage, and the salary-basis exemption was added in 1940. While the threshold for salary-basis exemption has been raised steadily since 1940, the proposed increase by the Obama Administration would represent an over 100% increase (from $23,660 per year to $47,476), and would implement automatic increases moving forward for the first time ever.

TIA is closely monitoring all developments relating to the new overtime rule, and is working to provide members with information to help them comply. For more information please contact Will Sehestedt at sehestedt@tianet.org.

Obama Administration Announces Dramatic Changes to Overtime Rules

On Wednesday, May 18, 2016, the Obama Administration announced details on the final rule for the salary threshold that governs which workers are eligible for overtime pay. This final rule comes with the Agency receiving over 250,000 public comments and with many concerns and objections of trade associations and major employers across the United States. The final rule will increase the annual salary threshold for employers to exempt an employee from overtime pay from $24,660 to approximately $47,476.

The rule goes into effect December 1, 2016, for all employers.

In addition to raising the salary threshold for exemption from overtime pay, key provisions of the new rule include:

Automatically updating the salary threshold every three years, based on wage growth over time (this is the first time an automatic increase has been allowed for this salary threshold)

Increase the "highly compensated employee" threshold from $100,000 per year to the 90th percentile of full-time salaried workers nationwide, $134,004 per year

Allow up to 10 percent of the salary threshold for non-highly compensated employees to be met by non-discretionary bonuses, incentive pay or commissions as long as the payments are made at least quarterly. Previously, incentive pay could not be counted toward meeting the salary threshold and was added at the insistence of the business community.

The Duties Test is not changed by the rule – this is a major win for industry

The business community has cited numerous concerns with the proposals to update the overtime rule, which originally would have set the salary threshold at $50,440, not included bonus or performance incentives in the salary calculation, and would have dramatically complicated workplace management in industries such as third-party logistics (among others).

TIA, along with the U.S. Chamber of Commerce, National Retail Federation, Society for Human Resource Management, and other business groups, strongly supports the Protecting Workplace Advancement and Opportunity Act. This bill, which has been introduced in both the U.S. House of Representatives (H.R. 4773) and the U.S. Senate (S. 2707), would nullify the final rule and ensure that employers retain the ability to provide a flexible workplace for their employees, encourage the use of cellular phones and mobile email access by their employees when serving customers, and provide the benefit of annual salaries to most employees.

Supreme Court Rules in Favor of CRST in EEOC Case

The U.S. Supreme Court issued a unanimous ruling on May 19, 2016, in favor of CRST Van Expedited, a division of CRST International, who is seeking to recover millions in legal fees spent defending itself from an Equal Employment Opportunity Commission-brought lawsuit. The Supreme Court order reverses a decision made by the U.S. 8th Circuit Court of Appeals, who ruled against CRST’s collection of attorney’s fees in the case. The 8th Circuit decision vacated two rulings by lower courts that said the EEOC owed CRST $4.7 million in legal fees. CRST appealed the decision and ultimately prevailed in the case’s last stop: The U.S. Supreme Court.

The final dollar amount owed to CRST has not been decided. Further adjudication will determine how much the EEOC must pay CRST. Two prior orders made by lower Federal Courts, however, determined the carrier is owed nearly $5 million in attorney’s fees and court costs.

The case stems from a lawsuit brought against CRST in 2007 by the EEOC. The commission charged that the carrier violated Title VIII provisions by allowing male instructors to train new female drivers while sharing a truck, saying the practice created a hostile work environment. Several women reported being sexually harassed by their male trainers.

All of the claims brought by the EEOC were eventually dismissed in court. A U.S. District Court in Iowa ruled the EEOC failed to show reasonable cause against CRST. The court also showed CRST made good faith efforts to conciliate the claims brought by its driver trainees.

The EEOC, following several other court stops, eventually withdrew its claims for all but one plaintiff, who settled her case for $50,000.

State of California Accepting Port Trucker Amnesty Applications

On Thursday, May 5, 2016, the California Labor Commissioner’s Office announced that it would begin accepting applications for the Motor Carrier Employer Amnesty Program for trucking companies that perform drayage services at any California port. This voluntary program allows companies to reclassify their drivers as employees and avoid liability for misclassifying them as independent contractors. The amnesty program will end on December 31, 2016.

Port truck drivers must be classified as employees in order to be eligible for unionization. Efforts to reclassify drivers have been supported strongly by the Teamsters union. While Teamsters union’s efforts are national, they have been most successful in California. Drivers have staged several strikes and, occasionally, companies have switched their drivers status from independent contractor to employee. In one significant example of the consequences of making the switch, Hub Group changed to an employee driven model after losing employee misclassification lawsuits in court but eventually chose to leave the California drayage market altogether.
The California Labor Commissioner’s office notes in its release that port truck drivers have filed 799 wage claims since 2011, claiming misclassification and seeking reimbursement for unlawful deductions and expenses. The office has awarded more than $35 million to drivers in 302 of those cases. Under California law AB 621, port drayage trucking companies can enter into a settlement agreement with the State of California whereby they agree to pay all wages and benefits owed to drivers misclassified as independent contractors, pay all taxes owed to the state as a result of misclassification, and agree to classify commercial drivers as employees. This settlement agreement will protect motor carriers from additional penalties and fines based on previous misclassification of drivers.

Worker classification is a major issue in the transportation industry, for logistics providers as well as for motor carriers. For more information on national worker reclassification efforts, and for other issues relating to organized labor, please contact Will Sehestedt at sehestedt@tianet.org or 703-299-5713.

Administration Retreats from Proposed Overtime Salary Threshold

On Thursday, April 28, POLITICO reported that the U.S. Department of Labor will likely lower the initially-proposed salary threshold to expand eligibility for overtime under the Fair Labor Standards Act. Sources familiar with the development of the final regulation indicated that the new salary threshold under consideration is $47,000 annually, and that the expected timeline for the release of the final rule is the middle of May 2016.

Advocates for the rule argue that the current threshold, which at $23,660 lies below the federal poverty threshold for a family of four and was last updated in 2004, is insufficient and dated. However, the proposals to raise the overtime threshold nearly to the standard of median household income in the U.S. has garnered substantial opposition.

Opponents of the new regulation point out that cost-of-living differs dramatically, and that the new rule makes no accommodation for less expensive suburban and rural areas. Additionally, many public entities, colleges and universities, and non-profit organizations cannot afford to pay workers at the level of the new proposed threshold. This would mean that the increase could force layoffs and limit workplace flexibility.

In 2015, the Administration proposed raising the annualized salary level for workers who are eligible for overtime pay from the current $23,660 to $50,440. The proposal generated public outrage, including over 250,000 individual comments on the proposal, and led to the introduction of the Protecting Workplace Advancement and Opportunity Act (S. 2707 and H.R. 4773) in Congress.

TIA strongly supports the Protecting Workplace Advancement and Opportunity Act, joining with other major national groups such as the U.S. Chamber of Commerce, the Society for Human Resource Management, and the National Retail Federation. TIA encourages all members to contact their members of Congress about this important issue, which they can do using this site. For more information, email advocacy@tianet.org or call 703-299-5700.

Court Rules Against Colorado Drivers Over Wage Law Dispute

On April 21, 2016, the 10th Circuit Court of Appeals affirmed an earlier decision by that District’s court, which awarded summary judgment to Decker Truck Lines in a dispute with Colorado drivers. At issue was whether drivers for Decker Truck Lines who operated short five-mile hauls between two Colorado locations were participants in interstate commerce, or whether they were intrastate drivers who would be protected by state wage laws.

The drivers pick-up and deliver outbound shipments from a Fort Collins, CO brewery to a Fort Collins, CO warehouse, and then backhaul empty kegs, pallets, and hops to the brewery. Because their work is limited to short hauls in Colorado, they asserted that they should be eligible for overtime pay and breaks for their schedule under Colorado law. The total distance between the brewery and the warehouse is approximately five miles. The drivers worked their routes with four 12-hour-and-15-minute days in a week, followed by a three day week with the same schedule.

Decker Truck Lines argued that the work performed by the drivers was exempted from state wage laws by the Motor Carrier Act exemption within the Fair Labor Standards Act. This exemption provides that motor carriers do not need to pay overtime to their drivers when the Secretary of Transportation has the power to establish qualifications and maximum hours of service. The courts ruled in this case that the Motor Carrier Act exemption applies because both the outbound finished goods and the inbound used goods from the warehouse were destined for or arriving from interstate commerce. The fact that the goods were temporarily stored in a warehouse does not mean that the Decker Truck Lines drivers were not participating in interstate commerce. This interstate commerce activity means that the drivers can be exempted from state wage laws.

Worker classification and exemptions are critically important and highly nuanced issues that face every third-party logistics company. For more information on these issues please contact Will Sehestedt at sehestedt@tianet.org or 703-299-5700.

Department of Labor

In a dynamic industry with many different employment and contracting models, TIA works hard to provide the latest information on U.S. labor law compliance and proposals to updates those regulations.The notable examples are NLRB and the proposal to increase the salary threshold for workers who were previously considered exempt from mandatory overtime under the Fair Labor Standards Act.

TIA is closely monitoring the pending rulemaking from the Administration, which would increase the salary threshold for exemption from overtime pay.A proposed rule from 2015 would make all workers making less than $970 per week, or $50,440 per year, eligible for overtime.Obviously this change would have enormous consequences on employers in the transportation and logistics industries.

Additionally, TIA frequently reports on efforts among the various U.S. states to reclassify workers from independent contractors to employees, and to generate more revenue for workers compensation insurance programs by targeting employers in the transportation and logistics industries.